Residential Lending Update.
Every Real Estate investor has heard about the Sub-Prime mortgage debacle. I have postings on this blog discussing it. There are all kinds of articles written about it and reporters are constantly keeping this news before us. Here is some of the information that your may not be getting from the information out there available to the general public.
Loans for investors to finance properties at 100% are all but non-existent. Interest rates for investors are moving up sharply and 90% financing or better is available at elevated interest rates approaching hard money loan interest rates (up to 14%). Financing deals with a combination of low credit scores, high loan to value ratios and non-owner occupied is virtually an impossibility given the posture of the market today.
To get institutional lending, most borrowers are going to have to put at least 10% down and be able to show at least 6 months of reserves in the bank. Stated loans are now only available for those borrowers who are actually self employed. Stated loans (very well accepted a few short months ago) are now called “liar Loans� and are being eliminated.
Most investors are being greatly influenced by these lending practice changes and many are unable to continue or are being forced to drastically curtail their investment activities.
More opportunity for strong borrowers is indeed a benefit if you fit into that category. However, money is more expensive which makes it harder to benefit with almost any strategy.
My opinion is that as prices come down, which they will, there will be better and better opportunities for those who have good credit. That said, timing is a huge issue (at least for me). Time your purchases when the market and credit is starting to improve rather than making the purchase and waiting for years to benefit from the market turn and the ability for buyers to obtain financing.
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